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Edited version of private ruling

Authorisation Number: 1011513341984

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Ruling

Subject: Self education

Question

Are you entitled to a deduction for self education expenses

Yes.

This ruling applies for the following period

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on

1 July 2009

Relevant facts

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

You are employed as a consultant.

You are undertaking a Diploma of Counselling at TAFE.

While your employer encourages employees to undertake study, you will not receive paid leave to undertake the course and your employer does not support you while doing the course.

A requisite on your current role is a high level of communication skills, interviewing ability, case management and adherence to ethical and regulatory frameworks. The major part of your current job requires you to counsel your clients but you are not entitled to call yourself a counsellor.

You can only undertake higher duties in your current role once you complete the course and register with the relevant association. Your pay rate is negotiated based on your current skill set.

After you have registered with the relevant association and negotiated a higher pay rate, you will still be working in the same role, possibly with the same client load but with higher expectations from you.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

Taxation Ruling TR 98/9 discusses the circumstances under which self education expenses are allowable as a deduction. A deduction is allowable for self education expenses if a taxpayer's current income earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self education enables the taxpayer to maintain or improve that skill or knowledge (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60; (1961) 12 ATD 348; (1961) 8 AITR 406).

Similarly, if the study of a subject of self education objectively leads to, or is likely to lead to an increase in a taxpayer's income from his or her current income earning activities in the future, a deduction is allowable.

In your case, it is accepted that the degree will maintain or enhance the skills that are required in the performance of your current employment duties. Consequently, the self education expenses incurred have the necessary and relevant connection with the earning of your assessable income and are therefore deductible under section 8-1 of the ITAA 1997.

Other Information - limit to the deductibility of self education expenses 

The self education expenses you can deduct may be subject to a reduction of up to $250 in accordance with section 82A of the Income Tax Assessment Act 1936.

An explanation of how this provision operates in relation to working out your self education expenses is provided at paragraphs 119 to 155 of TR 98/9, which can be accessed on our website www.ato.gov.au or pages 37 and 38 of TaxPack 2010.

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